Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The HSCEI serves as a benchmark to reflect the overall performance of the top 50 "Mainland China" securities listed in Hong Kong.</li>
<li>In this insight, we take a look at the final rankings for the HSCEI potential ADDs and potential DELs for the index rebal event in December 2024.</li>
<li>We see two ADDs/DELs - the same names we had in our last insight. At present, we expect US$474mn capping flows one-way but this can change by early-December 2024.</li>
</ul>


The HSCEI serves as a benchmark to reflect the overall performance of the top 50 "Mainland China" securities listed in Hong Kong.
In this insight, we take a look at the final rankings for the HSCEI potential ADDs and potential DELs for the index rebal event in December 2024.
We see two ADDs/DELs - the same names we had in our last insight. At present, we expect US$474mn capping flows one-way but this can change by early-December 2024.


Quiddity Leaderboard HSCEI Dec 24: Two Changes Likely; US$474mn Capping Flows One-Way

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Sino Biopharmaceutical / Equity Bottom-Up

<ul>
<li>After performance headwinds in 2022 and 2023, we have seen a turnaround of Sino Biopharma in 24H1. The Company is gradually getting rid of the negative influence of VBP.</li>
<li>Even if the performance improves in 2024, there is still great uncertainty about whether the performance target for 2030 (revenue to reach HK$100 billion) can be achieved as scheduled.</li>
<li>The innovative drug pipeline actually lacks competitiveness. Current valuation is not cheap. Deficiencies in corporate governance are one reason why the market is reluctant to offer Sino Biopharm high valuation.</li>
</ul>


After performance headwinds in 2022 and 2023, we have seen a turnaround of Sino Biopharma in 24H1. The Company is gradually getting rid of the negative influence of VBP.
Even if the performance improves in 2024, there is still great uncertainty about whether the performance target for 2030 (revenue to reach HK$100 billion) can be achieved as scheduled.
The innovative drug pipeline actually lacks competitiveness. Current valuation is not cheap. Deficiencies in corporate governance are one reason why the market is reluctant to offer Sino Biopharm high valuation.


Sino Biopharmaceutical (1177.HK) 24H1 - The Concerns Behind the Performance Turnaround

<ul>
<li>The biggest changes in 2023 medical insurance catalog are the lifting of payment restrictions on TCM injections, which would drive rapid sales growth in the hospital market this year.</li>
<li>GLP-1s are not flawless, and patients will lose not only fat but also muscle during weight-loss process. Then, another noteworthy opportunity has emerged - reduce fat and increase muscle.</li>
<li>In 2024, Sino Biopharm is expected to achieve single-digit revenue growth. Deficiencies in corporate governance are one reason why the market is reluctant to offer Sino Biopharm high valuation.</li>
</ul>


The biggest changes in 2023 medical insurance catalog are the lifting of payment restrictions on TCM injections, which would drive rapid sales growth in the hospital market this year.
GLP-1s are not flawless, and patients will lose not only fat but also muscle during weight-loss process. Then, another noteworthy opportunity has emerged - reduce fat and increase muscle.
In 2024, Sino Biopharm is expected to achieve single-digit revenue growth. Deficiencies in corporate governance are one reason why the market is reluctant to offer Sino Biopharm high valuation.


China Healthcare Weekly (Apr.6) - Boom of TCM Injections Is Coming, Defects in GLP-1s, Sino Biopharm

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

China Traditional Chinese Medicine / Event-Driven

<ul>
<li>Shockingly, the Sinopharm-led consortium’s offer for <a href="https://www.smartkarma.com/entities/china-traditional-chinese-medicine" target="_blank" data-smartkarma-citation="entities:351:1" rel="noopener">China Traditional Chinese Medicine (570 HK)</a> has lapsed as the precondition long stop date has not been extended.</li>
<li>This deal break caught many, including me, off guard. There are lessons to be learnt and questions to be asked. </li>
<li>Shareholders will have a bruising Monday. Our analysis suggests a deal break price of around HK$3.44, a 10% downside to the last close.</li>
</ul>


Shockingly, the Sinopharm-led consortium’s offer for China Traditional Chinese Medicine (570 HK) has lapsed as the precondition long stop date has not been extended.
This deal break caught many, including me, off guard. There are lessons to be learnt and questions to be asked. 
Shareholders will have a bruising Monday. Our analysis suggests a deal break price of around HK$3.44, a 10% downside to the last close.


China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price

Thematic (Sector/Industry)

<ul>
<li>Due to the popularity of GLP-1 target, the entire GLP-1 upstream and downstream industry chain has received great enthusiasm. We analyzed related investment opportunities but also concerns in this market.  </li>
<li>Domestic CXOs should focus on securing orders for overseas weight loss drugs. The market value increment brought by weight loss drugs to CXO should be higher than that of APIs.</li>
<li>Due to increasing competition/potential price war, how big the real market space is uncertain. So, the market value increment of weight loss drugs business for pharmaceutical companies could be lower-than-expected.</li>
</ul>


Due to the popularity of GLP-1 target, the entire GLP-1 upstream and downstream industry chain has received great enthusiasm. We analyzed related investment opportunities but also concerns in this market.  
Domestic CXOs should focus on securing orders for overseas weight loss drugs. The market value increment brought by weight loss drugs to CXO should be higher than that of APIs.
Due to increasing competition/potential price war, how big the real market space is uncertain. So, the market value increment of weight loss drugs business for pharmaceutical companies could be lower-than-expected.


China's Weight Loss Drug Market – The Investment Opportunities and the Risks Behind

Hong Kong

Sino Biopharmaceutical Limited, through its subsidiaries, researches, develops, produces, and sells biopharmaceutical products for the medical treatment of ophthalmia, as well as modernized Chinese medicine and chemical medicine for the treatment of hepatitis.

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Sino Biopharmaceutical (1177 HK)

Quiddity Leaderboard HSCEI Dec 24: Two Changes Likely; US$474mn Capping Flows One-Way

The one-way flow estimate for US$474mn translates to a turnover of roughly 4.2%. The final capping flows will be decided on 3rd December 2024.

Janaghan Jeyakumar, CFA